When Steven Vicinanza got a letter in the mail earlier this year informing him that he needed to pay $1,000 per employee for a license to some “distributed computer architecture” patents, he didn’t quite believe it at first. The letter seemed to be saying anyone using a modern office scanner to scan documents to e-mail would have to pay—which is to say, just about any business, period.

If he'd paid up, the IT services provider that Vicinanza founded, BlueWave Computing, would have owed $130,000.

The letters, he soon found out, were indeed real and quite serious—he wasn't the only person getting them. BlueWave works mostly with small and mid-sized businesses in the Atlanta area, and before long, several of his own customers were contacting him about letters they had received from the same mysterious entity: "Project Paperless LLC."

"[Hill] was very cordial and very nice," he told Ars. "He said, if you hook up a scanner and e-mail a PDF document—we have a patent that covers that as a process."

It didn’t seem credible that Hill was demanding money for just using basic office equipment exactly the way it was intended to be used. So Vicinanza clarified:

"So you're claiming anyone on a network with a scanner owes you a license?" asked Vicinanza. "He said, 'Yes, that's correct.' And at that point, I just lost it."

Vicinanza made the unusual choice to fight back against Hill and “Project Paperless”—and actually ended up with a pretty resounding victory. But the Project Paperless patents haven’t gone away. Instead, they’ve been passed on to a network of at least eight different shell companies with six-letter names like AdzPro, GosNel, and FasLan. Those entities are now sending out hundreds, if not thousands, of copies of the same demand letter to small businesses from New Hampshire to Minnesota. (For simplicity, I'll just refer to one of those entities, AdzPro.)

Ars has acquired several copies of the AdzPro demand letter; the only variations are the six-letter name of the shell company and the royalty demands, which range from $900 to $1,200 per employee. One such letter, in which AllLed demands $900 per worker, is published below. The name of the target company has been redacted. Sources that provided the letters are concerned that speaking on the record about their case could result in additional attention or threats from the patent owners.Led Letter.final.redacted

Vicinanza’s experience puts him at the heart of a type of "patent trolling" that has taken off in the past year. The Project Paperless via AdzPro letter-writing campaign is a kind of lowest-common-denominator patent demand. Patent-licensing companies are going after the users of everyday technology rather than their traditional targets, the tech companies that actually make technology. This year, more than ever, trolls have moved beyond tech in a big way.

Smaller and smaller companies are being targeted. In a paper on “Startups and Patent Trolls,” Prof. Colleen Chien of Santa Clara University found that 55 percent of defendants to patent troll suits are small, with less than $10 million in annual revenue. Even in the tech sector, a full 40 percent of the time, respondents to patent threats are being sued over technology that they use (like scanners or Wi-Fi) rather than their own technology.

Project Paperless and its progeny don’t have any interest in going after the Canons and the Xeroxes of the world. After all, they have patent lawyers on payroll already and are in a far better position to push back. Rather, Hill wanted to collect royalties from BlueWave and its customers.

Project Paperless' spawn—AdzPro, AllLed, GosNel, and the others listed above—exemplify the new strategy. They send out vast quantities of letters, mainly to businesses that never could have imagined they’d be involved in any kind of patent dispute. They send them from anonymous and ever-changing shell companies. And at the end of the day, they either file only a few lawsuits—as Project Paperless did—or none at all, which has been the AdzPro strategy thus far.

“Going after the end users may ultimately be more lucrative for them,” said one patent litigator at a technology company that's closely monitoring the AdzPro situation. “If they extract a small amount from each possible end user, the total amount might well end up being a much larger sum than they could ever get from the manufacturers. The ultimate pot of gold could end up being much bigger."

"Atlanta's Best Workplaces" become a lot less fun

Steve Vicinanza.

As a services provider to other businesses—who often sold scanners as part of his package—Vicinanza was well-positioned to get some sense of the scope of the Project Paperless campaign. He personally had conversations with about a dozen recipients of the letters and he suspects that about 50 to 100 companies in the Atlanta area received a letter. Another batch was sent out in Virginia.

Vicinanza noticed a few of his customers who had been threatened had been on the “Atlanta’s Best Workplaces” list published annually by the Atlanta Journal-Constitution. The “best workplaces” list included the number of employees each business had, which would have been useful to Project Paperless lawyers in calculating their demands. These were always on a per-employee basis.

Working backward off the “best workplaces” list, Vicinanza was able to get in touch with several other Project Paperless targets, suggesting that Project Paperless lawyers were indeed targeting companies based on the list.

Reactions to the letters varied. “Without question, some people were livid,” said Vicinanza. “Some of the smaller ones were scared out of their wits, in addition to being livid.”

Some were ready to fight back, while others had no intention of doing so. One mid-sized Atlanta business in the process of being acquired by a major Silicon Valley tech company paid the Project Paperless demand, no questions asked. Some companies just ignored the letters; others talked to an attorney. It isn’t clear the companies that did speak to their lawyers about the situation actually fared better.

“The patent attorneys typically have a whole different set of objectives,” said Vicinanza. “Now they’re in settlement mode. If the company does end up getting sued and the lawyer said ‘ignore them,’ a company could find themselves paying treble damages. Even my attorneys told me, settle it, you’re crazy to fight.”

But that wasn’t Vicinanza’s style. “I’m an IT guy, so I read the patent—and I was just appalled that this could even be called a patent.”

Project Paperless has four patents and one patent application it asserts, all linked to an inventor named Laurence C. Klein. “It was a lot of what I’d call gobbledygook,” said Vicinanza. “Just jargon and terms strung together—it’s really literally nonsensical.”

Readers wishing to judge for themselves can take a look at the asserted patents, numbers 6,185,590, 6,771,381, 7,477,410 and 7,986,426. AdzPro also notes it has an additional patent application filed in July 2011 that hasn’t yet resulted in a patent. The patents may have been useless from a technologist’s perspective, but fighting them off in court would be no small matter.

“My lawyer said, even if you win, this case will cost a million dollars. I said, I don’t think it will—but I’d rather pay a million than pay these guys $200,000.”

In 15 years of being in business, BlueWave had never been involved in a lawsuit of any kind. “This sort of thing is detrimental to the whole industry,” said Vicinanza. “If everybody just rolls over, that just encourages them [patent trolls] to keep going.”

In March, the ball dropped and Project Paperless’ threats against BlueWave turned into an actual lawsuit. As he promised, Vicinanza didn’t settle. Instead, he spent $5,000 on a prior art search and sent the results to the Project Paperless lawyers. He also hired a new lawyer, Ann Fort, who filed a third-party complaint against four of the companies that actually made the scanners—Xerox, Canon, Hewlett-Packard, and Brother. That could have compelled the manufacturers to get involved in the case.

In the end, Hill and his fellow lawyers at his small Atlanta firm, Hill, Kertscher and Wharton, didn’t have a lot of fight in them. Two weeks after he filed the third-party complaint, Project Paperless dropped its lawsuit. No settlement, no deal—they just went away. (As a result, the scanner makers never actually came to court.)

When Project Paperless dropped its suit, that was the end for Vicinanza and Blue Wave. But Vicinanza was proud of standing up. He put out a press release describing his saga as a “small victory in the war against patent abuse.”

BlueWave’s win was hardly the end of the Project Paperless patents, however. Today, those patents are at the heart of an even more expansive campaign to get cash out of America’s small businesses for using everyday office equipment.

Steven Hill wouldn't comment on Project Paperless, saying only that his firm declined to discuss what was a “client matter.” Hill also refused to comment on the new entities sending out AdzPro letters today, or any links he and his partners have to those companies.

240 Reader Comments

If that toll free number still works we should all call it for an hour a day. It probably costs them about 2 cents per minute, at least. Say 10,000 people at an hour a day = 12,000 $ per day cost to them. Best part is all you have to do is stay on hold since the volume would overwhelm the operators. Phone Bomb!!!

Can't this stuff be considered illegal? IE the demand letters? I'd think even if the patents were truely valid, isn't it a case of third party doctrine though, as the patents seem to be covering stuff that the manufacturers themselves would be producing and selling (a scanner, that can produce a PDF and email it).

Not all big gov't here, but could the various federal attorneys go after this stuff and/or someone like the FTC? I would think most resonable people would argue that the behavior is not a resonable attempt to reaching settlement, but an attempt to extort money (as there generally appears no real intent to bring a law suit of those threatened choose not to settle).

Surely any requests for damages should be redirected to the manufacturer? The way I see it, if I buy an item described to do something specific, then that item should already cover the costs of any patents. After all it is the manufacturer who created and leveraged those patents, if they are applicable. We start being in a murky place if we end with products stating '$200, not including costs of required patents', which this would amount to?

IANAL, so it would be useful to know whether someone would have legal standing to get the manufacturer involved and opt to delegate costs?

Best just to ignore the letters. If someone is sending out hundreds of letters it is very expensive to follow-up. So, by ignoring the letter you avoid ever doing anything to bring your company to the attention of the patent trolls. If a second follow-up letter is sent, just throw it in the trash bin. Don't follow-up, don't investigate, just ignore. Of course, that general advice doesn't always work and you would need to know when to take a different action (which requires legal advice, hence the $3000 cost to ignore) but the vast percentage of the time you can ignore such letters. It is simple economics. A patent law suit costs $300k to $500k to prosecute (if you do things on the very cheap end of the scale). If you are a small business with 50 employees or less the cost to litigate far exceeds the money the patent troll is going to get. Since they cannot afford to sue you, you can safely ignore the letters. Larger companies (with 100-1000 employees, for example) have slightly larger liabilities but the likelihood that damages are $1000/employee are awarded is very small so again, ignore the letters. If they actually want to sue, fight them in court and challenge their damage assessment and you likely will get off for pennies on the dollar. Most likely you would pay based on the machines you have and could ask for imdenification from the manufacture. So never pay, never response and fight anyone that files a lawsuit to the bitter end and you will find these types of activities disappear pretty quickly. It is only because some people are foolish enough to pay that such letters are even sent.

This is just like trolling on web sites, if everyone ignores the troll then the trolling stops. So if people stop feeding the trolls they will go away. Just. Ignore. The. Letters.

Second, I'm pretty sure you can't patent something that has already been patented, which really calls into question how he obtained these patents in the first place.

Third, if you read the descriptions of the patents, it appears he is interpreting the term, "virtual copying" as, "scanning into email". There is nothing "virtual" about using a scanner. Also, unless he has tirelessly described every possible step to that process, which can be done many ways, I don't see this holding up in ANY court.

Last, because he holds patents on a process which involves what is called "new use of existing technologies" (think bubble wrap, which started as wall paper) he can't assume people using those technologies (such as scanners, whose process and technologies patents are held by Xerox, and design and other patents held by every electronics company under the sun) are using them to scan to email.

In other words, the burden of proof is on him; all of these people could sue for harassment, and should.

Best just to ignore the letters. If someone is sending out hundreds of letters it is very expensive to follow-up. So, by ignoring the letter you avoid ever doing anything to bring your company to the attention of the patent trolls. If a second follow-up letter is sent, just throw it in the trash bin. Don't follow-up, don't investigate, just ignore. Of course, that general advice doesn't always work and you would need to know when to take a different action (which requires legal advice, hence the $3000 cost to ignore) but the vast percentage of the time you can ignore such letters. It is simple economics. A patent law suit costs $300k to $500k to prosecute (if you do things on the very cheap end of the scale). If you are a small business with 50 employees or less the cost to litigate far exceeds the money the patent troll is going to get. Since they cannot afford to sue you, you can safely ignore the letters. Larger companies (with 100-1000 employees, for example) have slightly larger liabilities but the likelihood that damages are $1000/employee are awarded is very small so again, ignore the letters. If they actually want to sue, fight them in court and challenge their damage assessment and you likely will get off for pennies on the dollar. Most likely you would pay based on the machines you have and could ask for imdenification from the manufacture. So never pay, never response and fight anyone that files a lawsuit to the bitter end and you will find these types of activities disappear pretty quickly. It is only because some people are foolish enough to pay that such letters are even sent.

This is just like trolling on web sites, if everyone ignores the troll then the trolling stops. So if people stop feeding the trolls they will go away. Just. Ignore. The. Letters.

Except for that part where they take you to court, and in your absence, the verdict goes against you and you're fined a much larger amount that has court sanction to force you to pay. And you can't ignore court orders unless you want to see your business eventually wound up.

These bozos have a legal team and so you have to assume ignoring them doesn't mean they'll go away, but that you'll be in a world of pain.

1) You can't sue users of a device, technology, or media until AFTER you sue the company that provided it, or at least subpoena the company for records, purchases, etc. Any action thereafter targeting more than 20 individuals must be filed as a class first, and only if the judge refuses the class can you target individuals.

2) make it illegal to subpoena or send legal notice to individuals directly without express judicial approval if charges are being levied or damages/royalties are requested to be paid directly. When sending such letters, a bond must be placed for reasonable legal costs for each end every letter sent. Each letter must be sent with the full intent of courtroom prosecution. If it is determined that the suing party is unable to or unwiling to take at least half of the class to court, additionally posting a bond to cover court costs for at least that much prosecution, then the attempt to sue will be dismissed with prejudice.

3) you can't sue people for using a device that contains an infringing patent, you can only sue the company that MADE the device. Business methods can't BE patented, so you can't actually sue over that anyway even now.

4) Any legal team violating the above rules will be subject to disbarment pending hearing. Each letter sent invalidly with the attempt to collect damages without judicial oversight in place will be subject to an up to $100,000 fine per incident (per letter), plus treble of all legal costs and damages incurred by those receiving the letters, payable directly to the named entity/business. Any lawsuits filed related to patents in such a way, or over license rights, subjects the owner of those rights to immediate forfeiture of those rights/patents. If the rightholder feels the legal team operated without good faith, they can sue the lawfirm but their rights are still forfeit.

I'm pretty sure you see the difference between Apple and these types of patent trolls.

These guys are trying to scam some money, Apple is trying to put its competitors out of business.

Surely you don't believe that. Apple can't put Samsung out of business through patents alone. They're just not that powerful. Also, you'll notice that Apple hasn't sued everyone - they've focused on Samsung and a few tit-for-tat suits. Samsung were pretty shameless, and that internal document showed they were intentionally copying.

All of which is completely irrelevant to this particular story. Tying the two as a few posters have done is trolling in itself.

3) you can't sue people for using a device that contains an infringing patent, you can only sue the company that MADE the device. Business methods can't BE patented, so you can't actually sue over that anyway even now.

This would be a huge change to US patent law, which allows any party who "makes, uses, or sells" a patented device or method to be sued for infringement.

What? So if I buy a car (which includes technology that's covered by thousands of patents, if not more), I can be sued if the manufacturer didn't properly license every last one of those patents from their respective holders? Or even if they did?

There are some new procedures under the AIA for slamming the banhammer on useless patents and patent trolls. They are quite expensive, and it's still early - they've only been around since September - but they are promising.

Piss off the wrong party and a typical patent troll's experience might go something like this:

1. Patent troll gets issued a useless patent (this happens too often, but I digress).2. Patent troll uses useless patent to threaten Company A with an infringement suit.3. Company A ignores threats, and patent troll sues.4. Company A has astute counsel that remembers one of the new post-grant proceedings under the AIA, and files an appropriate petition for, e.g., post grant review (PGR) of the patent in question.5. Patent troll tries to run away by withdrawing the complaint.6. Company A laughs and continues with the PGR process.7a. Patent troll disappears, doesn't file any responsive briefs/motions, and the patent is invalidated, or7b. Patent troll tries to fight, but since the patent is so obviously ... well, obvious (or even anticipated) by the prior art, that no arguments can save them ... and the patent is invalidated (and hopefully the troll goes bankrupt from the hefty attorney fees).8. Rinse and repeat.

It's not ideal, but the new proceedings do provide tools to fight fire with much bigger fire.

If the legislation isn't fixing this patent system pretty soon then someday someone will sue the wrong (or right) person who just hires a hitmen or solves the issue permanently by himself.Then doxing the these law trolls should be an effective deterent.

I'm guilty of violating a patent? ARE YOU KIDDING ME? Someone actually managed to secure a patent for what I would certainly consider an 'obvious' use for a particular machine??? Die patent trolls, DIE. Oh, and while you're at it, take your idiotic patent examiners with you.

We have Canon copiers in our office that do this. Perhaps I'm missing the point here, but I don't belive Canon has a license from these clowns (hard to get a license from them when they won't tell you who they are or how to contact them).

If I were to get a letter from them, my *only* response would be "talk to my lawyer". If that didn't work, it would be "see you in court". No way would they get a cent from me.

There was a similar case not long ago where the "troll-ees" formed a defense association and took the troll to court. The troll lost big time, I believe.

The joys of legalised extortion. (That would be patents and copyrights).

On the bright side, one can see these companies digging their own graves. Enough noise about patent trolls and maybe politicians will decide that the issue has to be dealt with. Of course, I have no faith in them actually solving it (by abolishing patent and copyright monopolies).

If that toll free number still works we should all call it for an hour a day. It probably costs them about 2 cents per minute, at least. Say 10,000 people at an hour a day = 12,000 $ per day cost to them. Best part is all you have to do is stay on hold since the volume would overwhelm the operators. Phone Bomb!!!

Actually I have already patented that business method. Anyone who uses it will owe me $1000 per attempted call.

Alright listen up! Everyone, this bulls%*t has gone on far to fu@&*ng long. We need to get a tremendous gathering of people in unison brandishing the most harsh attitudes whilst wielding the most exquisitely fashioned brooms, so that we might sweep this trash where it belongs!